Wednesday, 23 October 2013

Sometimes You're just beat

Sometime's you're just beat.

Karl Marx famously observed that the value of labour is the source of all wealth. And of course he was right.

A Modern Fairy Tale

A long long time ago, in a country far far away there was a great city in a verdant valley between great mountains. And the city had great natural resources, among them abundant vineyards from which was produced the most wonderful wine. And many men made a living from carrying that wine in pigs bladders from door to door and for a few fraction of a groat selling the wine to the city's inhabitants.

Till, one day, a wine seller went to a particular house where he had in the past enjoyed much custom. "I would love to buy your wine" advised the lady of the house, "but we do not have a beaker between us from which to drink it." "But why?" replied the wine seller.

The lady responded "Beakers are only sold by pedlars from beyond the mountains. And they are very expensive, two Groats each. We are poor people and, our beakers having all been broken, we cannot afford others." And the wine seller went on his way. Until he met the same story a few doors later and over the next few days found it repeated many times. And the wine seller found himself worrying for his future, for if people wouldn't buy his wine, for want of beakers, how would he feed his children. Of which he had many, as wine selling opened a number of opportunities.

Then, suddenly one night he found himself dreaming of the words of the prophet Rahm Emanuel. Every crisis is an opportunity. And he remembered his friend Jimmy the baker, a man who he remembered had travelled across the mountains as a young man. "Jimmy" he inquired the next day, "I don't suppose you know how to make beakers?" "Of course I do," replied Jimmy, "you take some clay, you shape it into a beaker and you then fire it in a kiln."

"Clay? A kiln?" inquired the wine seller? Jimmy looked quizzical at his friends ignorance. "Clay is that red mud you find by every river and a kiln," and with this he turned smiling towards his bread oven.

A week and a few other free drinks later exchanged with Jimmy and others for information, the wine seller returned to the baker with a question. "How much would you charge me for ten beakers, clay included?" The baker thought for a moment "The clay is free, it just needs collected from the river so......Five Groats" he replied. And when would you need paid, my old, old friend?" the wine-seller continued. "For you....in a month" and with that they shook hands.

For, in the interim the wine seller had returned to his (former) customers with a proposition. "I know you like my wine but have no means to drink it. Suppose I could sell you not only wine but a beaker to drink it from, for, perhaps"....pause...", a Groat a beaker?" And a lot of other hands had been shaken.

One month later the baker and the wine seller sat down for a glass of wine. Ten beakers had been produced and sold. The wine seller gave the baker his five Groats and suggested that perhaps next month's order might extend to fifty beakers at the same price. The baker nodded in agreement even though he was slightly disquieted for reasons he couldn't quite put his finger on. He wasn't reassured when, at the door, his friend asked for a Groat for the baker's share of the cost of their wine.

[We stop for a Marxist gloss. Marx says that the source of all wealth is the value of labour and the evil of capitalism the exploitation of its surplus value. From the story so far, on one view, the view broadly of the left, the wine-seller was sitting with five groats profit for having persuaded the baker to sell him ten groats worth of beakers for five groats. On the other view however, broadly the view of the right, had the wine-seller not identified the market and found the first ten customers then there would never have been the need for any beaker manufacture. The wine-seller would then have no extra groats, the baker would have no extra groats and the potential beaker customers would have no beakers. For what it's worth the beaker customers would at least still have a groat each but, this being (very) primitive capitalism, they would have nothing else to spend their groat on. Except wine. Which they had no means of drinking. But Marx is right on either view. For the clay, still inert in the ground, has no value. So the wealth here has been created by the value of the baker's labour, in making beakers, combined with the value of the wine-seller in primitive development, sales and marketing. Whether the division of the spoils is "fair" is must await the next bit of the story.]

Twelve months later, the baker was dead. A (primitive) intellectual property dispute having arisen, both he and his one time friend, the wine seller, had sought in vain for (primitive) corporate lawyers. So, instead they had sat down for a reconciliatory glass. After which, in circumstances never entirely satisfactorily explained, the baker had been found floating in the river in a form of (primitive) "alternative dispute resolution".

At the funeral, the wine-seller approached the baker's family. "I'm so sorry" he explained. "I thought he had had too much to drink to go swimming but he simply wouldn't see sense. Anyway, you'll be needing some money. I wouldn't insult you with charity but perhaps I could buy your father's kiln for, shall we say, ten groats? I've always wanted to try making my own bread."

"That's very generous" replied the baker's widow, "but how, wine seller, will my sons make a living?" The wine seller paused. "I will find them something." The widow was moved to tears: "How could the Baker family ever thank you wine seller?"

"There is no need for thanks, but I think you mean not the Baker family but the Beaker family...... and perhaps I misheard you when you called me Wine Seller, when of course you meant to call me the Boss".

And the widow nodded.

Twenty years later, the Boss had become a big wheel in the beaker market and had long since stopped selling wine. He was now selling 10,000 beakers a month, not just in the city and not just for wine and he employed 1,000 beaker makers, not all called Beaker. At the end of each month they had their five Groats each and he had, eh, 5,000 Groats. The subsistence of that first original supply agreement between him and the baker might have looked, to the outside, a bit unfair had there been a (primitive) free press or indeed a (primitive) democratic assembly with a (primitive) social democratic administration. That might indeed have prompted demands for a (primitive) minimum wage. But, of course, this being a primitive society none of these things existed. So the Beakers and their similarly employed non-namesakes were on their own.

But then, one day, one Beaker, with a particularly large family, went to the Boss and complained he was struggling to feed his family. Could I not, he asked, be paid six groats for every ten beakers? The Boss pondered. He could easily have given this one man his six groats a month. The Boss would still have 4,999 groats a month but he was conscious that giving this particular Beaker an extra groat would undoubtedly lead to similar demands from others. So he told him to get lost. As one individual, what could he do? He could go and get another job but that assumed that job would pay more than five Groats a month. And it also assumed that he could find one, particularly if the Boss let it be known in the City that he was a "troublemaker".

So the snubbed Beaker, realising that he has no power on his own, decided the only solution is to enlist the assistance of the other Beakers. Indeed not just the Beakers but of all the beaker makers. "I'm worth more than five groats a month" he told them "and so are we all". "And with his 5,000 Groats a month, the Boss can well afford to pay us that. We should form a Trade Union." And the beaker makers agreed and agreed that their Union demand that every beaker maker be paid six groats a month. Failing which they would withdraw their labour. And the Boss, being a (primitive) Development, Sales and Marketing guy and not unfortunately also a (primitive) HR person told them to get on with it. And a strike followed.

Except that after one month of the strike, while the beaker makers were all five groats worse off the Boss suddenly realised he was 5,000 Groats worse off (he was also not a (primitive) stock control person). And what's more those customers presenting at his factory to buy new beakers were telling him that not only would they go and buy their immediately needed beaker elsewhere, they wouldn't be back to him in the case of future demand for a beaker, now they knew they can't rely on the supply he purported to provide. Indeed there was talk of somebody else setting up another beaker factory, possibly even one run by its workers.

So not only was the Boss worse off he was beginning to realise that his customer base was melting away. And he found himself thinking that 4,000 Groats a month is still a lot of groats and if things went on much longer it might not even be 4,000 Groats a month when the dispute was resolved. So he decided, after all, "in a spirit of magnanimity and recognising that we're all in this together", to concede the Union's demand.

So the beaker makers got their six groats and hailed their own wisdom in joining the Union. And they all lived happily ever after in a spirit of industrial harmony and collective enterprise, more or less........................

Until a hundred years later. Beaker demand is unprecedented. There are 10,000 beaker makers and 100,000 beakers produced every month. And thanks to ever increased power of the Union the beaker makers are being paid nine Groats a month. But the great great grandson of the Boss is collecting 10,000 Groats a month, still twice as much as his forebear. And he loves being called The New Boss. Neither side is entirely happy but both sides can live with it.

And then, one day, a man arrives in the town with a caravan full of beakers. "How much are they?" demand the people. "Three quarters of a Groat each" replies the trader. "How can that be" demand the people, "beakers from beyond the mountains have always been much more expensive?"

"Have you not heard of the new Pass through the mountains that has been found? Or of the famine there that means people will work for bread alone?"

And the people had heard of neither but they knew that the cheaper they could buy their beakers the better. So they bought from the trader and not from the New Boss.

And at the end of the month, The New Boss sat down and looked at the books. He had paid the beaker makers 90,000 Groats but he had sold no beakers. And so he called in the Union.

"This can't go on" he said.

"Why?" replied the Union. The New Boss was puzzled. "Because I am the Boss and the purpose of being the Boss (old or new) is to make money. Not to spend it on beaker makers."

"But you have millions of Groats, all entirely derived from our labours and the labours of of our forefathers."

"Let's just set aside for the moment the issue of the role of entrepreneurship and accept that to be true. So what?"

"You owe us an obligation"

"Let's just to agree to differ on that"

"Alright, what do you suggest?"

"I suggest that if you accept seven groats for ten beakers then we could still turn this round"

"No way, nine Groats is the rate for the job"

"It's not across the mountains"

"What does that matter"

"Tell that to the people not buying our beakers"

And so the Union went on strike. Only the New Boss discovered that while the (old) Boss had been 5,000 Groats a month worse off as a result of a strike, the New Boss was actually 90,000 Groats better off.

And so, one morning, when the beaker makers woke up, they discovered the New Boss had piled all his remaining Groats on to a cart and disappeared over the mountains during the night.

And the beaker makers complained they had been treated appallingly. And they were right for the New Boss had given them no warning. But a lot of good did their complaints do them. For the people still had beakers. Cheaper beakers than the local beaker makers were prepared to supply. And it was too late now to offer to match that price.